Interpretation of Contract
The interpretation of contract is the determination of the meaning of the words/terms used in its contents that are ambiguous, not understood, and not obvious. An interpretation involves a question of law since there is a force of law between the contracting parties. Literal Meaning The literal meaning of the words/terms and provisions/stipulations shall prevail if they are clear and leave no doubt upon the intention of the contracting parties. This rule is applied in the following legal cases: Evident Intention of the Parties The evident intention of the parties shall prevail if there is a conflict between such intention and the terms. * The evident intention are determined by considering: * the interpretation to the terms and stipulations by the parties themselves. * the contemporaneous and subsequent acts of the parties. * the mutual relationship between the parties and the purpose of the contract. This rule is applied in the following legal cases: Inconsistency of General Terms The specific terms shall prevail if there is inconsistency or confusion over the uses of general terms covering the same subject matter. Similarly, a specific intent prevails over a general intent. The meaning of general words/terms should not also include things and events that are different from those upon which the parties intended to agree. This rule is applied in the following legal cases: Stipulations having Multiple Meanings The most adequate meaning shall prevail if some provisions/stipulations have several meanings. The provisions should bear that interpreted meaning (input) to make the contract valid and effective. 1373 This rule is applied in the following legal cases: Terms having Multiple Meanings The most sensible meaning shall prevail if a word/term has multiple meanings. The sensibility of a meaning is determined by: * keeping with the nature and object of the contract. * presuming the ordinary and generally accepted meaning. * proving it with the use of evidences. This rule is applied in the following legal cases: Doughtful Provisions The interpretation of a contract as a whole shall prevail if there are various doughtful stipulations in the entirety. The provisions of a contract must not be viewed together, not in isolation to each other. These provisions are harmonized with each other so as to give effect and meaning to the entire contract. This rule is applied in the following legal cases: Usage or Custom of the Place The usage or custom of the place shall prevail if the parties entered into their contract with reference to such usage or custom. It shall also fill the omission of provisions which are ordinarily established 1376 The existence of the usage or custom should be proven to a court: * without being alleged (pleaded) if such usage or custom is general. * after being alleged (pleaded) if such usage or custom is local. This rule is applied in the following legal cases: Obscure Terms The interpretation of obscure term or stipulation shall be against the party who caused the obscurity. This is because one should be careful in drafting a contract and responsible in case of mistakes and ambiguity. This rule is applied in the following legal cases: Supplementary Rule of Interpretation In case the aforementioned rules are unable to settle doubts, the supplementary rule shall resolved such doubts: * in incidental circumstances of a gratuitous contract, the interpretation should be made which would result in the least transmission of rights and interests. * in incidental circumstances of an onerous contract, the interpretation should be made which would result in the greatest reciprocity of interests. * in object, the contract shall be null and void since the intention of the parties cannot be known. This rule is applied in the following legal cases: Principles of Interpretation in the Rules of Court The rules in the interpretation of documents now contained in Rule 130, Sections 10-19 of the Revised Rules of Court shall also be observed: * the writing shall be interpreted according to the legal meaning it bears in the place of its execution, unless the parties intended otherwise. * the several provisions/stipulations of an instrument shall be interpreted so as to give effect to all if possible. * the interpretation specific provisions shall override the general provisions in case of inconsistency; so a particular or specific intent will control a general one that is inconsistent with it. * the interpretation shall consider the circumstances under which it was made, including the situation of the subject thereof and of the parties to it. * the terms shall be presumed to have used in their ordinary and generally accepted meaning, unless intended to be used with a different meaning. * the written words shall prevail over the printed form in case of inconsistency. * the explanation of certain writings may be provided by experts and interpreters if the characters in such writings are difficult to be deciphered, or the language is not understood. * the interpretation of the terms that have been intended in a different meaning by both parties shall be against the party who understood it. * the interpretation of a valid provision that have been given different meanings shall favor the party in whose favor the provision was made. * the interpretation in favor of natural right shall prevail if an instrument can have two interpretations in which the other interpretation is against such right. * the interpretation shall be according to usage. Category:Obligations and Contracts